Scotland vs. UK Payroll - Q&A with Simon Parsons

Scotland vs. UK Payroll - Q&A with Simon Parsons

With the result of the UK referendum to leave the European Union and indication by Scotland’s first minister to run a further Devolution referendum, in this blog I consider the potential implications for the next few years for Scotland and Payroll services.

2016 has already seen the implementation of the Scottish Rate of Income Tax (SRIT) replacing the former Scottish Variable Rate (SVR). Additionally, other deductions governed by the Scottish Parliament
in relation to payroll: Maintenance Arrestments, Earnings Arrestments, Conjoined Arrestments, Debt Arrangement Scheme and SRIT are already part of the SD Worx Payroll Solution.

Question 1 – So what, of the future, will the SD Worx payroll solution cater for Scottish requirements when more devolved power is given around tax and other part of pay related legislation?

As with the introduction of the Scottish Rate of Income Tax (SRIT), additional legislative changes in relation to the expansion of Scottish Tax Raising powers will be incorporated as part of annual legislative update. The implementation
of SRIT is present in SD Worx payroll solutions now. In addition, the SD Worx payroll engine development has gone beyond the basic SRIT base requirements. Separate tax calculations are already present
which support future parallel process Scottish taxation calculation which is ready to accept differing tax bands and earnings threshold. Although SRIT is identical in law to the rest of the UK, the SD Worx solution already holds
the relevant control parameters to allow seperation. SD Worx experts form part of the consultation and working groups with HMRC in the development of such policy and have strong ties with BCS Payroll,
CIPP, IReeN as well as having representation with government working groups.

Question 2 – What is the SD Worx position for Scotland if there is a vote for independence? How would you create a payroll engine in Scotland?

SD Worx has a payroll engine for Scotland already and has a strong and growing business presence. If devolved powers introduces steps to separate out tax and Social Insurance etc. further, then similar principles as apply to Guernsey, Jersey and the Isle
of Man are available as options if required i.e. Calculations will be introduced to cater for the relevant fiscal authority. If future separation were potentially significant (i.e. the ending of cross border payroll operations), then a separate Scottish
Fiscal marker would be considered. If it came to that point then a Scottish Payroll would be entirely separate to the rest of the UK payroll but yet supported on the same SD Worx solution. Presently Scottish Residents and Scottish parliamentarians (no
matter where resident) are marked by a ‘Tax Regime’ indicator of ‘S’ by HM Revenue & Customs – this data is part of the SD Worx solution as standard already.

Question 3 – What if Scotland goes into the Euro?

The same principles and planning undertaken previously if the UK were to go into the Euro still apply. If and when detail of the transition is known, then development would be undertaken to apply the transfer with the operation of the fixed exchange rate
between Scottish Sterling and Euro. Consideration to the change of payment method in the UK may also need to be considered and the continuance of the use of the UK BACS capability.

In conclusion

A pragmatic approach of enhancement if, as and when the transition were to occur over a period of years would be used. SD Worx UK has a long legacy of successful implementation of such change into its SD Worx Payroll Solution..
Whether a different commercial structure would be required as the service separates and alternate currencies are applied, and different related services are introduced (such as a Scottish Bank clearing systems) is something that would require consideration
as and when change is considered, progressed and applied.

SD Worx is a strong payroll solutions partner for businesses in Scotland.

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About the author

Simon ParsonsDirector of Payment, Benefits & Compliance Strategies

Simon has been a major contributor to SD Worx’s payroll expertise since 1984. Besides being influential in the development of SD Worx’s payroll services,
he is a major presence on a number of HMRC consultative groups and committees.

A fellow of the Chartered Institute of Payroll Professionals and one of the original Masters of Science in Payroll Management, Simon is a regular author
and speaker on payroll matters. He is also Chair of IReeN, the electronic exchange with government user network, and was appointed chair of the
British Computer Society (BCS) Payroll Group in September 2013.

Simon has won a number of awards in the past including the Strathearn Award for Lifetime Achievement at the 2012 Pay & Benefits Awards, the Payroll
Alliance Award for Advancing the Payroll Profession in 2010 and IPP Person of the Year in 2006.